Liten nedgång ändrar inte på faktum att Metas dominans är total

By Max Chafkin

Bloomberg, 08 August 2022

Mark Zuckerberg is trying something new. No, I don’t mean his latest attempts to rip off aspects of a major rival while swallowing up startups in a nascent field he hopes to dominate. Zuckerberg has used those tactics to great success for more than a decade. I’m talking about his attempt to present Meta Platforms Inc., the company formerly known as Facebook, as an underdog.

During an all-hands meeting earlier this summer, Zuckerberg painted a picture of a company in crisis. Facebook’s revenue growth had accelerated dramatically during the Covid pandemic, as users spent more time on their devices and shopped online nonstop. For the second quarter of 2019, the company had reported year-over-year revenue growth of 28%; two years later, that figure had doubled, to 56%. But now reality was setting in. Zuckerberg warned that Meta was entering one of the “worst downturns that we’ve seen in recent history.” He reprised the message on the company’s latest earnings call, on July 27. “I try to push the company to be one that learns faster and just keeps iterating,” he explained. “The moment that we stop doing that, then we’ll basically fall behind. It’s a very competitive field.”

Leaving Zuckerberg’s economic analysis aside—it’s not even clear the US economy is in a recession, let alone a world-historic downturn—there are lots of reasons for pessimism about Meta. It seems increasingly doubtful that the Covid-era trends that played so well to the company’s strengths will last, as people return to saner, less-online consumption patterns. Moreover, Apple Inc.’s privacy changes have undermined a key aspect of Meta’s targeted ads business—Meta has predicted this change alone will cost it around $10 billion in revenue this year. A third problem is the company’s reputation: Despite Zuckerberg’s attempt to rebrand it for the metaverse and despite the cringeworthy marketing the company deployed to promote its advertising business, the social network is still seen as somewhere between deeply uncool or downright creepy. Instagram users are demanding that the company “make Instagram Instagram again.” The Kardashians are not happy.

All of this has sent the stock down 50% since February, leading to apocalyptic-sounding headlines and causing some to celebrate the coming era of belt-tightening that Zuckerberg has promised. But the doomsayers are overstating the precariousness of the company’s position. Yes, Facebook has reverted to its pre-Covid condition. On the other hand, Facebook’s pre-Covid condition was one of absolute dominance of social media. When you’re already the biggest media platform in human history, with roughly 3 billion users looking in every day, it’s not exactly easy to grow.

Nor is criticism from users anything new for Meta. The company has creeped people out from its earliest days, and the Facebook app itself hasn’t been cool for at least a decade. Zuckerberg’s always had a good way to address that problem, though: buying or copying competing apps. The company acquired Instagram when high school and college students got sick of the News Feed, and then bought WhatsApp when social media activity started moving into private chat groups. When it became clear that Instagrammers preferred the disappearing-post format developed by Snapchat, Facebook grafted the feature onto Instagram.

These moves didn’t exactly endear users to Zuckerberg, but they’ve meant that his company owns nearly all of the top social networking apps outside of China. The company is unavoidable for advertisers hoping to sell products on the internet or for media companies hoping to distribute content online. From a social and political standpoint, this has been unbelievably destructive. Facebook created a new way for autocrats to consolidate power, fueled hatred and political violence in some of the most vulnerable parts of the world, and helped turn the media industry into a Dan Bongino-dominated hellscape.

It’s also made a lot of money along the way. Last quarter—the one that caused Zuckerberg to warn of an historic downturn—was indeed not so great. For the first time in Meta’s history, it reported a drop in revenue. But the decrease was barely perceptible, down just 1% from the same period last year, and more than 70% better than the second quarter of 2019. The company still took in a staggering $29 billion in revenue and made $7 billion in profit, a figure that makes every other social media company look minuscule. Snap took in just $1 billion in its most recent quarter, and lost more than $400 million. Pinterest, with roughly half of Snap’s revenue, lost less money, but the company recently dispatched its chief executive officer, and it’s contending with an activist shareholder campaign. Twitter is … well, the best-case scenario for Twitter involves a Delaware judge ordering an edgelord to take it over.

It’s true that Facebook does have one important competitor in TikTok, but even here, Facebook’s positioning is much stronger than Zuckerberg would lead you to believe. TikTok is growing quickly, and it is where the cool people like to spend time. But the company has yet to figure out how to turn its user growth into revenue that looks anything like Facebook’s. TikTok’s 2021 revenue was $4 billion; Meta brought in roughly 8 times that, in profit. Marketers have said that the Chinese-owned social network is just around the corner from making serious money, but even if those predictions are borne out, TikTok will be a fraction of the size of Meta.

Part of what’s going on here is that Meta is better at turning its users into dollars than any of its competitors. Facebook’s average revenue per user in the US and Canada was over $50 in its most recent quarter; by comparison, Pinterest’s was just under $6. Twitter and Snap report average revenue per user slightly differently, and TikTok doesn’t report it at all, making direct comparisons tough, but they’re all almost certainly way behind.

Meanwhile, Meta is already having some success in its efforts to ape TikTok. In fact, one of the reasons that revenue fell is that the company has been funneling users away from its extremely profitable services to its less profitable TikTok knockoff, Reels. It’s probably only a matter of time before Facebook can figure out how to make as much money selling ads on Reels as it does in the more mature parts of its app.

In a different regulatory environment, Zuckerberg might simply try to buy TikTok, but that’s not possible at the moment. Meta’s response to scrutiny from D.C. has been to argue that it faces plenty of competitors and that its products help rather than harm consumers, and it’s harder for the government to argue that Meta is a monopoly with its CEO worrying openly about ruination at the hands of its Chinese rival. But Zuckerberg, who once described Microsoft—then (as now) one of the largest companies in the world by market cap—as an “underdog,” has always had a knack for making corporate imperialism look scrappy, and for motivating employees by creating a sense of doom. But the worst-case scenario for Facebook isn’t doom; it’s cultural irrelevance. Very profitable irrelevance.

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